Risk Appetite Returning and Economy Recovering

Mar 2, 2021

Although the yield on the US Treasury bonds grew on Monday, it wasn’t the same pace compared to the last week. This calmed the markets somewhat, and they returned to their favorite fun: buying everything in risky asset markets. As a result, the stock markets grew in price, as well as the cryptocurrency market, and the commodity markets were strengthening.

An additional reason for the growth was an attempt to incorporate the success of the vote in the House of Representatives on the 1.9 trillion Biden stimulus package and the expectation of its successful passage in the Senate.

But there is some more positive news from yesterday. Data on business activity in the US manufacturing sector came out better than expected. Even the labor market component of the ISM manufacturing index was above 50, that is, it signaled an increase in economic activity. Considering the US labor market stats, coming this week, this is cause for joy.

But despite all this optimism, buying risky assets at current prices is sheer madness. And the fees for it can be quite high. Consider, for instance, the Cathie Wood funds from the ARK family. They noted that they actively bought all kinds of Tesla and other bitcoins. So, just on one Thursday last week, investors took about $500 million from funds. And it’s not known for how long it’d last—especially considering the Bitcoin sell-off on Friday.

Well, God bless them with risky assets.

Let’s talk about the latest news. Early this morning, the Reserve Bank of Australia decided to leave the rate unchanged. The decision is expected. But in general, the growth of the Australian dollar is questionable. Especially if commodity markets are under downward pressure again.